Govt Downsizes Budget by Nearly Rs 276 Billion

The government has reduced the size of the budget for the current fiscal year (FY 2025/26) by Rs 275.79 billion through a mid-term review, citing slow spending, revenue pressures, and the need to re-prioritise expenditure.

According to the mid-term budget assessment report unveiled by the Ministry of Finance on Tuesday, the total budget has been revised down from Rs 1,964.11 billion to Rs 1,688.32 billion, bringing the overall outlay to 85.96 percent of the original allocation.

Along with the overall reduction, the government has revised both expenditure targets and revenue estimates. Recurrent expenditure has been cut to Rs 1,125.97 billion, capital expenditure to Rs 243.30 billion, and financial management to Rs 319.04 billion.

Under the original budget, the government had allocated Rs 1,180.98 billion for recurrent expenditure, Rs 407.88 billion for capital expenditure, and Rs 375.24 billion for financial management.

Revenue mobilisation for the current fiscal year has also been revised, with the government maintaining a total revenue target of Rs 1,480 billion, of which Rs 1,315 billion is earmarked for federal expenditure and Rs 165 billion for sharing with provincial and local governments. Revenue is expected to finance about 67.49 percent of total federal expenditure.

During the current fiscal year, the government has set a target of collecting tax revenue of Rs 1,325.58 billion, accounting for 89.57 percent of total revenue, while non-tax revenue is projected at Rs 154.41 billion, or 10.43 percent.

Of total tax revenue, direct taxes are estimated at Rs 407.03 billion (30.70 percent), while indirect taxes are projected at Rs 918.55 billion (69.30 percent).

The Ministry of Finance said the revised budget aims to achieve six percent economic growth in the current fiscal year while keeping consumer price inflation within 5.5 percent.

According to the report, the revised estimates take into account the adverse situation following the Gen Z movement on September 8 and 9 last year, project re-prioritisation, and the Cabinet’s decision to cut expenditure.

The report noted that recurrent expenditure has increased due to costs related to the upcoming House of Representatives election, social security obligations, employee dearness allowances, and relief for families of those injured or killed during protests.

“The quality of capital expenditure has not improved as expected due to inadequate project preparation, difficulties in land acquisition and forest use, and delays in payments to contractors,” the report stated.

The government has identified reconstruction of physical infrastructure damaged during the movement, payments for strategic projects under construction, and mandatory obligations such as salaries, allowances, and pensions as top spending priorities.

The Ministry of Finance said it has adopted a policy of withholding funds for unprepared, fragmented, and unproductive programmes with uncertain outcomes and redirecting resources to priority projects.

To control recurrent expenditure, the government has adopted measures such as discontinuing meeting allowances, limiting the use of external consultants, controlling foreign visits, and avoiding the creation of new posts.

The government has also given high priority to securing funding sources and managing the necessary budget for security agencies and the Election Commission for the House of Representatives election scheduled for March 5.

The ministry added that, amid declining foreign aid and pressure on revenue collection, efforts have been made to maintain budget balance by maximizing the use of domestic resources, including revenue and domestic borrowing.

To make the budget system more results-oriented, the report said the government will move ahead with the implementation of project banks, expansion of digital payment systems, and timely reforms in public procurement laws. – With inputs from RSS